Nokia has agreed to acquire Infinera for $6.65 per share, representing an enterprise value of US$ 2.3 billion and a premium of 28% to Infinera’s share price at the close of 26 June 2024.
The merger will also strengthen Nokia’s presence in the North American optical market, an area where the two companies have minimal customer overlap. Infinera, which has established a solid foothold in North America with approximately 60% of its sales, will enhance Nokia’s optical scale in the region. This complements Nokia’s strong market positions in APAC, EMEA, and Latin America. The combination builds on Nokia’s commitment to US-based manufacturing and advanced testing and packaging capabilities.
The companies cited increased scale and profitability as driving factors for the merger.
Key benefits listed by Nokia
- Enhanced Global Scale: Increases Nokia’s Optical Networks business by 75%.
- Advanced Capabilities: Expanded DSP development, silicon photonics expertise, and PIC technology.
- North American Market Growth: Strengthens position with Infinera’s established presence.
- Enterprise and Webscale Expansion: Accelerates growth in the enterprise sector and webscale market, leveraging Infinera’s 30% sales in this segment and recent advancements in high-speed, low-power optical components.
Nokia said the deal will strengthen its leadership in optical and increase exposure to webscale customers, the fastest growing segment of the market. The combination with Infinera is projected to accelerate Nokia’s journey to a double-digit operating margin in its Optical Networks business. Nokia targets to achieve EUR 200 million of net comparable operating profit synergies by 2027. This transaction along with the recently announced sale of Submarine Networks will create a reshaped Network Infrastructure built on three strong pillars of Fixed Networks, IP Networks and Optical Networks. Nokia targets mid-single digit organic growth for the overall Network Infrastructure business and to improve its operating margin to mid-to-high teens level.
Under the deal, for each Infinera share, Infinera shareholders will be able to elect to receive either: 1) $6.65 cash, 2) 1.7896 Nokia shares, or 3) a combination of $4.66 in cash and 0.5355 Nokia shares for each Infinera share. All Nokia shares will be issued in the form of American Depositary Shares. The definitive agreement includes a proration mechanism so that the Nokia shares issued in the transaction do not exceed an amount equal to approximately 30% of the aggregate consideration that may be paid to Infinera shareholders.
Pekka Lundmark, President and CEO of Nokia, said: “In 2021 we increased our organic investment in Optical Networks with a view to improving our competitiveness. That decision has paid off and has delivered improved customer recognition, strong sales growth and increased profitability. We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks. The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles. With the opportunity to deliver over 10% comparable EPS accretion, we believe this will create significant value for shareholders.”
Federico Guillén, President of Network Infrastructure at Nokia, said: “Today, Network Infrastructure offers a unique portfolio across the fixed access, optical and IP networks domains built on leading technology innovation and a strong customer focus. This acquisition will further strengthen the optical pillar of our business, expand our growth opportunities across all our target customer segments and improve our operating margin. I am extremely pleased that we are bringing together these two talented and dedicated teams. Separately, we have long respected each other as competitors. Together, we find the logic of combination irresistible.”
David Heard, CEO of Infinera, said: “We are really excited about the value this combination will bring to our global customers. We believe Nokia is an excellent partner and together we will have greater scale and deeper resources to set the pace of innovation and address rapidly changing customer needs at a time when optics are more important than ever – across telecom networks, inter-data center applications, and now inside the data center. This combination will further leverage our vertically integrated optical semiconductor technologies. Furthermore, our stakeholders will have the opportunity to participate in the upside of a global leader in optical networking solutions.”
